What Is In Your Derivatives?

March 2023
Region: Europe

With all the market turmoil and headlines about insolvencies or potential insolvencies in the financial sector and the wider markets, and potential rescue of stressed/distressed entities, many clients are concerned, and should be thinking, about the potential impact of these developments on their derivatives (commonly documented under an ISDA master agreement (an ISDA)) and, in particular: (a) if the relevant event constitutes a default, potential event of default, event of default or termination event or, alternatively, will trigger automatic early termination, under their ISDAs with their counterparties; (b) if such an event constitutes a potential event of default, an event of default or a termination event under the ISDA, what are the potential consequences of the occurrence of such an event; and (c) what practical considerations should be taken into account.

It is important for clients to be closely reviewing the terms of their ISDAs, paying particular attention to any deviations from standard terms.